Rethink 'disrupted' business models, warns CFSGAM

In an investment environment characterised by disruption, investors will need to reassess the way they look at traditional business models, says Colonial First State Global Asset Management.

Globally, business models are changing, and what was once successful is struggling in today’s environment, said Colonial First State Global Asset Management senior investment analyst James White.

Speaking at a Stockbrokers Association of Australia event in Sydney yesterday, Mr White said higher levels of competition and technological change is resulting in new and exceedingly different business models.

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“The business model has been disrupted. What we’re seeing is the ways that we have historically done business… and been able to make profits have started to change dramatically,” he said.

Mr White gave the example of companies such as Uber and Airbnb. These companies have distorted traditional business models and are making profits without needing large amounts of capital.

“Historic business structures don’t need the capital that they used to need, new business structures don’t need very much capital.

“The challenge I think we’ve got as investors over the course of the next 10 to 20 years is being able to find those sorts of assets where you’ve got structural growth,” Mr White said.

Mr White said investors need to look for companies that are responding to the society’s increasing demand for services, but where capital can still earn a return and where it can still play an important role in the company.

In terms of the financial services industry, technology is playing a greater role.

“Clearly, we have seen in Australia that technology plays a really big role in financial services.

“People are actually engaging with financial services in a very different way to the past,” he said.

According to Mr White, from a professional’s perspective, “it’s a great thing.”

“What it does is demand of us to offer a much better service and a much higher value service.

“What us as individuals will offer is a much more labour intensive service, a much more knowledge intensive service, and that’s where I think the value will be in the future,” said Mr White.